World of Work Report 2013 - International Labour Organization

Inadequate policy coordination tends to introduce downward pressure on
aggregate demand. The experience of developing countries in the 1980s and 1990s
is a case in point. In reaction to the fi nancial crises during that period, many of
these economies embarked on external surplus strategies. This was possible because
advanced economies ran external deficits; however, the imbalances were unsustainable.
Looking to the future, a different approach must be found in order to create a
stable environment for growth and job creation. Evidence from the Great Depression,
the recessions of the 1970s and 1980s (Oudiz and Sachs, 1984), the Asian
fi n a n c i a l c r i s i s a n d m o r e r e c e n t e m p i r i c a l e v i d e n c1 e3 s u g g e s t t h a t t h e b e n efi ts of
coordinated policy efforts in terms of job creation are substantial.14
…. and, third, to recognize that fairer income distribution
can produce both equity and effi ciency gains.
Distributional concerns represent a further major obstacle to the adoption of jobfriendly
strategies. It is a fact that there will be winners and losers in the adoption of
such strategies. For example, shifting taxation away from productive investment and
employment will tend to impact on fi nancial and property incomes. Analysis is important
to assess whether these trade-offs are real or not. And if the adoption of jobfriendly
policies does indeed tend to favour low- and middle-income groups or small
businesses more than other groups or businesses, it is important to assess both the
equity and the efficiency gains associated with different strategies (see Torres, 2010).
For instance, well-designed wage policies may support equity goals while contributing
to overall growth and tax receipts, thereby relieving pressure on fiscal policy.
There is a role for the ILO in building political consensus
and facilitating social dialogue.
The ILO can be part of the solution to the “information and coordination problems”.
The ILO, as an international agency specializing in labour issues, can provide
support and international credibility to national initiatives for adopting
job-friendly strategies.
The promotion of policies for job-rich growth and equity is a fundamental
aspect of the ILO’s agenda. Indeed, it is stated in the ILO Constitution and other
foundational documents.15 Since the crisis broke out, the ILO has been actively
engaged in international debates on how to secure a job-rich recovery and a transition
to a more sustainable pattern of global development and growth (ILO, 2010).
The ILO’s efforts to provide a job-centred response to the crisis led to the adoption
of the Global Jobs Pact (ILO, 2009a) – a global policy instrument that involved
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13. A number of theoretical and empirical analyses have argued about the significant gains to be
made from coordination. See, for example, Canzoneri et al. (2005), Cooley and Quadrini (2002),
Kollmann (2002), Pappa (2002), Sutherland (2002) and Tchakarov (2002).
14. Inward-looking government bailouts to fi nancial institutions drew much needed capital from
the rest of the world, especially from developing countries. Another example is the implementation
in early October of a deposit guarantee in Ireland, which attracted an amazing number of depositors
away from British banks, nearly inducing a run on deposits (see Frieden, 2009).
15. The Declaration on Social Justice for a Fair Globalization, adopted in 2008, builds on the
Philadelphia Declaration of 1944 and the Declaration on Fundamental Principles and Rights
at Work of 1998. It emphasizes the key role of the ILO in dealing with the social dimension of
globalization through the Decent Work Agenda. Through this Declaration, Heads of State and
Governments stated that they agreed “to make the goals of full and productive employment and
decent work for all … a central objective of our national and international policies as well as our
national development agendas” ILO (2008).
World of Work Report 2013: Repairing the economic and social fabric